Stocks Slide on Latest Signs of Sales Malaise

U.S. stocks turned red this afternoon on a report that Wal-Mart is trimming inventory amid weak sales. It appeared to be another early sign that the holiday sales season isn’t going well, and a jittery market responded by selling.

Wal-Mart, however, is vociferously denying the report.

U.S. stocks, which had been logging modest gains and trying to squelch a losing streak that dated to last week, suddenly went south within the last hour, spurred by the story about Wal-Mart. Seems our fellow travelers over at Bloomberg got a hold of some internal Wal-Mart emails, in which executives talked about cutting back on inventory, which was piling up faster than sales were moving the stuff out the door.

The market turned swiftly as the news seeped through. The S&P 500 was up a few points, right around 1700, before the story broke. They turned abruptly, but importantly the 1690-1695 range that we mentioned earlier held. The index is still in the red, but the move down seems to have stalled.

The Dow currently is down 45 points, at 15290, the S&P 500 is off 2 at 1695. But these aren’t huge moves, and even amid the current losing streak, equities remain near their record highs. The yield on the U.S. 10-year Treasury note continues to fall, down to 2.63%, after briefly touching 3% a few weeks back.

The economy still remains in a fragile state, the ongoing budget fight in Washington isn’t helping, and that’s going to put a collar on the holiday season. Hopes for the proverbial “second-half rebound” aside, none of that should be very surprising.

Update: David Tovar, Wal-Mart’s vice president of communications called the Bloomberg report “completely irresponsible.” He added: “I think they (Bloomberg) are taking a huge leap and drawing a very broad conclusion on one email from one buyer to one supplier.”